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July 20, 2012

Singapore Exchange Denies It Will Buy London Stock Exchange

Trading partnership, not acquisition, was subject of agreement

A report in Britain’s Daily Telegraph on Thursday that the Singapore Exchange (SGX) was in talks to buy the London Stock Exchange (LSE) was denied by the former on Friday. Last week the two exchanges reached an agreement to allow customers to trade blue-chip stocks on both platforms.

Reuters reported Friday that the Telegraph had posted its report about a potential 7.2 billion-pound ($11.3 billion) merger on its website Thursday. LSE shares Friday were below the takeover price cited in the article, indicating that markets placed little credence in the report.

On Friday SGE issued a statement that said in part, “SGX has not engaged in talks with the LSE on a potential merger. However, we are open to collaborations and partnerships which may benefit our shareholders and the company."

SGX and LSE had teamed up to try to buy the largest metals exchange in the world, the London Metal Exchange, just last month, although in that transaction Hong Kong Exchanges and Clearing emerged victorious.

Magnus Boecker, head of SGX, said in the report that further partnerships were not out of the question, although rather than mergers and acquisitions, they were more likely to be in the arena of “products and services.”

He was quoted saying, "Hopefully we can do more between London and SGX, like I can see us doing more with NYSE Euronext and [Deutsche Boerse's] Eurex and Nasdaq."

Regulators and investors alike have forestalled a number of merger efforts recently, and should such a merger effort have emerged, it would have been likely to go down to defeat.

In February the European Commission (EC) forbade the $7.4 billion mega-merger of NYSE Euronext and Deutsche Boerse, citing concerns over competition. Last year, both LSE and SGX failed in takeover attempts, the former in a planned 2.3 billion-pound merger with Canada's TMX Group after shareholder opposition and the latter in a proposed $7.8 billion merger with the Australian Exchange that was stopped by the Australian government.

Dominique Cerutti, president and deputy chief executive of NYSE Euronext, commented that smaller transactions were more likely to succeed in the current climate.

He was quoted saying, "Consolidation among exchanges makes sense but there are major barriers to these deals. Consolidation, however, will continue at a smaller scale through regional deals or strategic transactions to consolidate asset classes."